Chairman Emeritus and MD of Large Listed Company Diverted Public Money: SEBI Reply to SAT in Zee Matter

The Securities and Exchange Board of India (SEBI) in its reply in the matter of Zee Enterprises to Securities and Appellate Tribunal (SAT) has pointed out that Chairman Emeritus Subhash Chandra and Managing Director and CEO Punit Goenka of this large listed company have diverted public money to private entities.

"In the instant case, we have a situation before us where the Chairman Emeritus and the Managing Director and CEO of this large listed company are involved in a myriad of different schemes and transactions through which vast amounts of public money belonging to listed companies are diverted to private entities owned and controlled by these persons," SEBI said in its reply to SAT.

Subhash Chandra and Punit Goenka have moved SAT against the SEBI order barring them from holding director positions or key management personnel in any listed company on allged siphoning of funds from Zee Enterprises.

"The Appellant's conduct is telling in this regard. Not only have there been violations but also the issuance of multiple false disclosures and submission of statements to cover up such wrongdoings. In Shirpur, we have also seen that the promoter group timed its offloading of shares in the open market to avoid bearing the brunt of the fall in the market value of Shirpur's shares. It is ultimately the small retail investors who endured the downfall in share price," SEBI added.

ZEEL is one of the top 200 largest listed companies in India today having large number of public shareholders and retail investors and therefore, occupies a prominent position in the Indian securities market.

SEBI said as noted in the impugned order that the Appellants created a facade through sham entries to misrepresent to the investors as well as the regulator that the money had been returned by Seven Related Companies, whereas in reality, it was ZEEL's own funds which rotated through multiple layers to finally end in ZEEL's account. These facts reasonably warrant urgent action on the part of the Respondent to safeguard the management of such companies and protect their investors and other stakeholders.

In fact, if during a preliminary examination, it is found prima facie that the person is indulging in manipulation of the securities market, SEBI is obliged to pass an ex-parte ad interim order to safeguard the interest of investors and protect the integrity of the securities market.

It is undoubtedly evident from the manner in which monies flowed from one promoter company to another that the monies of ZEEL and other listed companies have been used by the promoters to give the false impression that the Seven Related Parties have repaid the amount of Rs 200 crore (appropriated by Yes Bank) to ZEEL.

In fact, an analysis of the transactions evinces that the transfers occurred between the conduit (middlemen) entities on the same date or consecutive days in a sequential fashion and at very quick intervals (within seconds and minutes), indicating that these transactions are not bonafide in nature but that these transfers were only for the purpose of funnelling money to the Seven Related Parties so that they could make payment to ZEEL of the amounts appropriated by Yes Bank, SEBI said.